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With health care reform under way, many restaurant operators are wondering how they will handle rising health care costs. Some franchisees of popular chains have publicly discussed options such as cutting staff and hours, initiating hiring freezes, or passing increased costs on to customers.
The pros and cons of these tactics can be argued endlessly, but it’s important to realize that health care benefits directly affect one of the most important aspects of any business: employee retention. At a time when, according to the National Restaurant Association (NRA), 54 percent of quick-serve operators expect recruiting and retaining employees to be more challenging in the year ahead, business owners should provide their teams with additional perks to reduce the likelihood of attrition.
What does this mean for owners and franchisees?
Quick-service restaurants have traditionally been known for hiring high school and college students. Today, however, they’re frequently staffed by adults who join the industry in their late 20s and early 30s and who stay on the job into their 40s and beyond. The employees’ older ages and their extended tenure highlight the importance health care and other benefits play in choosing an employer. Workers need options because they can no longer rely on their parents’ health insurance, and operators need skilled veteran employees.
One way operators can attract and retain top talent is by offering valuable benefits. Providing the people they rely on to run their businesses—full- and part-time managerial employees, and even junior-level staff—with a range of benefits goes a long way toward ensuring long-term worker satisfaction and fulfillment.
In fact, according to the 2012 Aflac WorkForces Report, nearly four in 10 workers who feel their employers do not care about their staffs are likely to leave their jobs within 12 months. Of those likely to look for new jobs, close to 40 percent say a comprehensive benefits package would demonstrate that their employers care about them.
Benefits can be the deciding factor for employees
Restaurateurs nationwide cited health care costs as a main concern for 2013, according to the NRA, and those costs are likely of equal concern to quick-service workers. Since the median pay for food servers, beverage servers, and related employees is about $8.72 per hour, an employee averaging 40 hours weekly earns about $18,000 annually before taxes. Workers at this income level who face a $10,000 hospital stay and have an 80/20 co-insurance ratio pay about $2,000 in out-of-pocket costs, along with deductibles and additional health care expenses not covered by their plans. And, of course, they will need to keep up with daily living expenses while hospitalized and recovering. However, for employees with hospital indemnity plans, voluntary insurance coverage would kick in, paying cash benefits that could be used to pay out-of-pocket costs or go toward living expenses such as groceries, child care, and transportation.
Coping with an illness or injury—even one that doesn’t result in a hospital stay—can negatively affect an employee’s financial stability. Offering insurance coverage that helps workers address rising costs and protects their financial security creates a more attractive benefits package, which results in a more desirable workplace. Adding voluntary accident, disability, vision, dental, and life insurance policies with premiums that are paid 100 percent by employees is a wise choice for companies because it doesn’t affect their bottom lines.
Quick-service workers are looking to their employers for benefits options. For example, workers have gone on strike against major fast-food chains, citing low wages and “skinnying” solutions such as those proposed by some franchisees in response to health care reform. It’s only a matter of time before employees demand more robust benefits to offset minimal pay raises, bonuses, and reduced work schedules. Sponsoring wellness programs, offering voluntary insurance, and educating workers about their benefits are all smart strategies for quick-service owners and operators who want to ensure their staffs feel valued and stem employees’ searches for other jobs.
Restaurants typically operate on a slim 3–5 percent pre-tax profit margin, so offering robust health insurance plans may be a financial struggle. However, supplementing major medical coverage with voluntary insurance and wellness programs is a win-win for operators and workers: Operators can offer a broader range of benefits to attract and retain a productive workforce at no added cost to their businesses, and employees have access to better insurance options and help staying healthy.